Caroline Siarkiewicz, Chief Executive of the Money and Pensions Service said:
“The Advertising Standards Authority’s (ASA) rulings on the practices of some commercial firms are a positive and welcome development for people struggling with debt, as well as the free debt advice sector which supports these customers.
“Some of the practices deployed by these commercial firms were concerning. For instance, many implied a misleading association with genuine debt advice charities, leading some customers to take up services unknowingly from a commercial organisation when they had been searching for free advice. Other claims made by some firms had the potential to get people to ask for a debt solution that may not be suitable for their circumstances and in some cases require them to pay unnecessary fees.
“The ASA decision has come at a crucial time. This month we anticipate a call about debt every four minutes to the Money Advice Service helpline, and we expect the demand for debt advice to increase over the next 12 to 18 months due to the financial impact of the Covid-19 pandemic. Many people will need support for the first time but also may not know where to begin.
“Just as a doctor reviews a patient’s circumstances in the round before recommending treatment, free debt advisors assess a person’s situation holistically before recommending a debt solution. There are lots of ways out of problem debt. However, many of these commercial firms specialise in providing just one kind of debt solution and cannot advise on the whole range of options available.
“Free debt advice can be life changing for people in difficulty. Our research shows that 63% of customers with debts are reducing or clearing them within 3-6 months after receiving impartial debt advice. Anyone who is worried about debt should seek impartial advice by visiting the Debt Advice Locator Tool on the Money Advice Service website, which will help you find a qualified free adviser in your local area to help you get back on track.”
MaPS offers the following tips for people to tackle debt worries:
- Open up to someone. Talking about money can be challenging because of feelings of shame, embarrassment or not wanting to burden others. However, opening up to someone can be an important first step to help you regain control of your finances. Research has also shown that people who talk about money feel less stressed or anxious and more in control.
- Work out your debts. Write down everything that you owe. This might seem overwhelming but facing up to what you owe will help in the long run.
- Pay debts in the right order. Make sure to pay priority bills and debts such as mortgage, rent and energy payments before secondary debts like overdrafts, personal loans, credit cards and Buy Now Pay Later (BNPL) arrangements.
- Avoid high-cost credit. While it can be tempting to use high-cost credit options like payday loans, if you do need to borrow, then shop around and consider more affordable options like credit unions.
- Set a budget. A good way to understand how much you can afford to pay back each month is to write down what your income is and list all your expenditure. The budget planner on the Money Advice Service website can help you calculate this.
- Seek professional help quickly if you are struggling with debt as the sooner you act, the easier it will be to manage. You can use the debt advice locator tool to find a free debt adviser in your local area.
The Money and Pensions Service worked with several free-to-client debt advice services to gather evidence and submit a range of complaints to the Advertising Standards Agency. These complaints related to commercial firms’ advertising practices targeting people searching for debt advice.
MaPS is the largest single funder of free debt advice in England and provides funding to organisations such as Citizens Advice, StepChange and National Debtline.
Free and impartial debt advice is widely available online, but the top positions in search engine results for debt-related terms are dominated by commercial, profit making advertisers who have paid to rank at the top. A significant proportion of people searching for a named debt charity are instead being diverted to commercial companies using pay-per-click (PPC) advertising.
MaPS raised these complaints to the ASA due to the growing body of evidence of client detriment. Specifically, clients who have established a relationship with a commercial organisation mistakenly believing it was a debt charity, clients who have entered into a repayment debt solution that is not sustainable and clients who have paid unnecessary fees to commercial firms.
Further, valuable resource within genuine debt charities was increasingly being diverted away from advice giving into dealing with queries and complaints as a result of ‘copy-cat’ commercial firms.
About the Money and Pensions Service
The Money and Pensions Service (MaPS) is here to ensure every person feels more in control of their finances throughout their lives: from pocket money to pensions. When they are, communities are healthier, businesses are more prosperous, the economy benefits and individuals feel better off. MaPS delivers free and impartial money and pensions guidance to the public through the Money Advice Service, The Pensions Advisory Service and Pension Wise.
MaPS is working to make sure the whole of the UK understands that financial, physical and mental health are all deeply connected. MaPS’ role is to connect organisations with the shared purpose of achieving the five goals set out in the UK Strategy for Financial Wellbeing.
MaPS supports innovation so that everyone can use the most effective methods to help people feel more in control of their money, targeted to those most in need and inclusive of people from all backgrounds. MaPS is an arm’s-length body sponsored by the Department for Work and Pensions (DWP).